Discussion about this post

User's avatar
Stephen Thair's avatar

I worked in tech for 34yrs. I don't own any crypto because it was so obviously a scam from day 1, and even the underlying blockchain tech is still, decades later, a solution looking for a problem*.

That said, much of "modern finance" (derivatives, securitisation, CDOs etc) are also so far removed (or leveraged) from "real assets" that their worth is essentially as fictitious as the worth assigned to crypto. They have value because everyone says they have value, until they don't (cf the GFC in 2008).

The big difference is ubiquity and liquidity.

There are long-established, kinda well-regulated mechanisms, all around the world, for exchanging those tokens of value that trade huge volumes ($trillions) every day, so you aren't locked into a proprietary "exchange" begging for your money back before your wife leaves you and takes the kids. There are also very well-established mechanisms for managing risk (hedging, insurance, etc) AND very well-established mechanisms for clawing value back if you get scammed ie the court system, where the laws and precedent are clear and well-established.

None of these are perfect (see Madoff) but they are "better" than some crypto scheme cooked up and promoted by shady people with opaque pasta who inevitably turn out to be conmen, or rapists, or both.

That said, part deux, the underlying "real assets" that underpin the traditional finance sector, normally shares, are increasingly as fictious and delusional as crypto too, with earnings-per-share that are negative (because the company has never made a profit) for shares with multi-billion dollar market caps, that trade on multiples that are 10x or 100x outside of the long-term multiples for that sector.

Even the valuations for 100yr old blue-chip companies that do make real things with real value are increasingly suspect, due to stock buy-back's that serve little purpose other than to manipulate the stock price so that it aligns with analyst expectations and/or allows the C-suite execs to hit their bonus targets.

Unfortunately, it's a game we all have to play, as we need somewhere to put our retirement savings etc, unless you want to go full prepper and build yourself a compound somewhere and kid yourself that you're self-sufficient, which lasts until you realise you really have no idea how to make antibiotics and those red streaks travelling up your leg from the scratch you got last week really don't look very good or you really need to buy some quality bull semen because your 4 cow "herd" is about 1 generation away from having 2 heads.

"The house of delusions is cheap to build but drafty to live in." A.E. Housman.

Expand full comment
Claire Hartnell's avatar

Companion piece: https://m.youtube.com/watch?v=YQ_xWvX1n9g “The Line Goes Up”. This is a witty, detailed takedown of NFTs explained by treading the same ground detailed in this blog. TLDR Bitcoin is a grift run by speculators to detach suckers from their (also pretty ponzied) real coin known as the US$. In the end, economies are simple - people make things, save things & consume things. Anything outside this system is an economic rent, a Ponzi scheme, an arbitrage or a genuine market innovation to bridge the gap between planting a seed & reaping the harvest. The West has given up on the basics of a plant, consume, save economy & switched it all for monopolies, speculation & captured digital arbitrage. Trump is the agent of chaos who will collapse it all.

Expand full comment
26 more comments...

No posts